Tenaga: A Potential Bearish Reversal?

Tenaga broke the strong support from the horizontal line at RM13.50-13.55. This is not your normal breakdown of horizontal line support; this is the breakdown of the neckline of a Head and Shoulders formation. The only consolation is that the breakout is not accompanied by an increase in volume. I hope that Tenaga will stage a strong rebound soon. 

Because of the breakdown, the technical outlook for Tenaga contradicts with the positive fundamental outlook for the stock. Thus long-term investors would certainly be in a difficult dilemma: To hold, to buy or to sell?? Let's forget about the next question: WHY? for now.


Chart 1: Tenaga's daily chart as at Jan 31, 2017_11:30 (Source: MalaysiaStock.Biz)

For now, I would say that if Tenaga can recover above the RM13.55 mark again, it would be a good BUY. Failure to break the neckline of a Head and Shoulders formation - normally a reversal pattern - would automatically convert it into a continuation pattern. However, if the breakdown is followed by continuous price decline on increased volume, then the bearish reversal is at hand. We must adopt the bearish view for Tenaga. It could easily slide to RM12.00-12.20 before any rebound kicks in.

Chart 2: Tenaga's monthly chart as at Jan 31, 2017_9.35 (Source: MalaysiaStock.Biz)

Based on the above, you should be very careful in buying into the current price decline in Tenaga. The correct approach is to sell if the price fails to recover above RM13.50. You should only buy if Tenaga can recover above RM13.50. Good luck!!

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.